H-1B visa abuse limits wages and steals US jobs

The H-1B visa program was created in 1990 to allow companies to bring skilled technical workers into the USA. It’s a non-immigrant visa and so has nothing at all to do with staying in the country, becoming a citizen, or starting a business. Big tech employers are constantly lobbying for increases in H-1B quotas citing their inability to find qualified US job applicants. Microsoft cofounder Bill Gates and other leaders from the IT industry have testified about this before Congress. Both major political parties embrace the H-1B program with varying levels of enthusiasm.

But Bill Gates is wrong. What he said to Congress may have been right for Microsoft but was wrong for America and can only lead to lower wages, lower employment, and a lower standard of living. This is a bigger deal than people understand: it’s the rebirth of industrial labor relations circa 1920. Our ignorance about the H-1B visa program is being used to unfairly limit wages and steal -- yes, steal -- jobs from US citizens.

H-1B Explained

There are a number of common misunderstandings about the H-1B program, the first of which is its size. H-1B quotas are set by Congress and vary from 65,000 to 190,000 per year. While that would seem to limit the impact of the program on a nation of 300+ million, H-1B is way bigger than you think because each visa lasts for three years and can be extended for another three years after that.

At any moment, then, there are about 700,000 H-1B visa holders working in the USA.

Most of these H-1B visa holders work in Information Technology and most of those come from India. There are about 500,000 IT workers in the USA holding H-1B visas. According to the US Census Bureau, there are about 2.5 million IT workers in America. So approximately 20 percent of the domestic IT workforce isn’t domestic at all, but imported on H-1B visas. Keep this in mind as we move forward.

H-1B is a non-immigrant visa. H-1B holders can work here for 3-6 years but then have to return to their native countries. It’s possible for H-1B’s to convert to a different kind of visa but not commonly done. The most common way, in fact, for converting an H-1B visa into a green card is through marriage to a US citizen.

H-1B isn’t the only way for foreigners to work in America. They can work to some extent on student visas and, in fact, many student visas are eventually converted to H-1B for those who have a job and want to stay but maybe not immigrate.

Poorly Understood

There is a misconception about the H-1B program that it was designed to allow companies to import workers with unique talents. There has long been a visa program for exactly that purpose. The O (for outstanding) visa program is for importing geniuses and nothing else. Interestingly enough, the O visa program has no quotas. So when Bill Gates complained about not being able to import enough top technical people for Microsoft, he wasn’t talking about geniuses, just normal coders.

I don’t want to pick on just Microsoft here, but I happen to know the company well and have written over the years about its technical recruiting procedures. Microsoft has a rigorous recruitment and vetting process. So does Google, Apple -- you name the company. All of these companies will take as many of O visa candidates as they can get, but there just aren’t that many who qualify, which is why quotas aren’t required.

So when Microsoft -- or Boeing, for that matter -- says a limitation on H-1B visas keeps them from getting top talent, they don’t mean it in the way that they imply. If a prospective employee is really top talent -- the kind of engineer who can truly do things others simply can’t -- there isn’t much keeping the company from hiring that person under the O visa program.

H-1B visas are about journeyman techies and nothing else.

Visa Shuffling

Companies can also transfer employees into the country who have worked for at least a year for the company overseas under an L-1 visa. These, too, are limited by quota and the quota is typically lower than for H-1Bs. Back in the late 1980s when the H-1B program was first being considered it was viewed as a preferable short-term alternative to L-1. It has since turned into something else far darker.

So has the B visa, which is intended for companies to bring their foreign employees into the US for business meetings and trade shows. You’d be amazed how many such business meetings and trade shows last 30 days as companies use B visas to enable foreign employees to work awhile in the United States. I’m told that IBM sometimes platoons workers on B visas, sending them to places like Mexico for a short time then bringing them back across the boarder for another stint.

Tourist visas are also commonly abused even though they specifically prohibit work.

The more interesting question here isn’t which multinational corporations consistently abuse B and tourist visas but which ones don’t, it is so common.

No Labor Shortage

A key argument for H-1B has always been that there’s a shortage of technical talent in US IT. This has been taken as a given by both major political parties. But it’s wrong. Here are six rigorous studies (1, 2, 3, 4, 5, 6) that show there is no shortage of STEM workers in the United States nor the likelihood of such a shortage in years to come.

You may recall a recent column where the IT community in Memphis, TN proved there was no labor shortage in that technology hotbed.

The whole labor shortage argument is total hogwash. Yes, there is a labor shortage at substandard wages.

Can all of this be just about money? Yes.

What are the Rules?

The rules for H-1B visas state that they must be for technical positions for which there is no comparable US citizen available and the position must pay the prevailing wage or higher.

It’s this definition of prevailing wage where we next see signs of H-1B abuse by employers. The intent of the original law was for companies not to use H-1B workers simply to save money. In the enabling legislation from 1990, however, there are two different definitions of the term “prevailing wage.” The first is quite strict while the second, which is used by self-certifying employers to set actual pay scales, has plenty of wiggle room.

Warning, dense reading ahead!

Here is the initial definition of “prevailing wage” in 8 USC 1182(n)(1)A):

The employer­

(i) is offering and will offer during the period of authorized employment to aliens admitted or provided status as an H–1B nonimmigrant wages that are at least­

(ii) the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question, or

(iii) the prevailing wage level for the occupational classification in the area of employment,

And here is the redefinition of “prevailing wage” in 8 USC 1182(p)(4):

(4) Where the Secretary of Labor uses, or makes available to employers, a governmental survey to determine the prevailing wage, such survey shall provide at least 4 levels of wages commensurate with experience, education, and the level of supervision. Where an existing government survey has only 2 levels, 2 intermediate levels may be created by dividing by 3, the difference between the 2 levels offered, adding the quotient thus obtained to the first level and subtracting that quotient from the second level.

Note that section (p) requires that the Department of Labor set up four prevailing wage levels based upon skill but section (n) only requires a prevailing wage for occupation and location. There is no statutory requirement that the employer pick the skill level that matches the employee.

Let’s see this in action. According to Bureau of Labor Statistics data, the mean wage for a programmer in Charlotte, NC is $73,965. But the level 1 prevailing wage is $50,170. Most prevailing wage claims on H-1B applications use the level 1 wage driving down the cost of labor in this instance by nearly a third.

If you were casually reading the statutes, by the way, you would never see this redefinition. That’s because section (p) does not refer to H-1B but rather to section (n) which is referenced by 8 USC 1101(a)(15)(H)(i)(b).

Got that?

Greed gone Wrong

But wait there’s more!

It’s not hard to suppose from this information that an influx of H-1B workers representing an average 20 percent of the local technical work force (those 500,000 H-1Bs against a 2.5 million body labor pool) would push down local wages. There’s plenty of anecdotal evidence that it does, too, but most of the more rigorous academic studies don’t show this because there is no easily available data.

What data is available comes from the initial employer applications for H-1B slots These Labor Condition Applications, called LCAs, include employer estimates of prevailing wages. Because there are always more H-1B applications than there are H-1B visas granted, every employer seeking an H-1B may file 3-5 LCAs per slot, each of which can use a different prevailing wage. But when the visa application is approved, it is my understanding that sponsoring companies can choose which LCA they really mean and apply that prevailing wage number to the hire.

Because the visa has already been granted of course they’ll tend to take the lowest prevailing wage number, because that’s the number against which they match the local labor market.

Remember that part of this business of getting H-1Bs is there must not be a US citizen with comparable skills available at the local prevailing wage. If we consider that exercise using the data from Charlotte, above, a company would probably be seeking a programmer expecting $73,965 or above (after all, they are trying to attract talent, right?) but offering $50,170 or below (the multiple LCA trick). No wonder they can’t get a qualified citizen to take the job.

Based solely on approved LCAs, 51 percent of recently granted H-1B visas were in the 25th percentile for pay or below. That’s statistically impossible under the intent of the program.

We have no clear way of knowing what companies actually pay their H-1Bs beyond the LCAs, because that information isn’t typically gathered, but remember that whatever level it is won’t include benefits that can add another 30-40 percent to a US citizen’s wage.

Extent of Abuse

Here is the Government of India touting its H-1Bs as cheaper than US workers, which of course they aren’t by law supposed to be.

I wish this was the extent of abuse, but it isn’t. A 2011 Government Accountability Office study found that approximately 21 percent of H-1B visas are simply fraudulent -- that the worker is working for a company other than the one that applied for the visa, that the visa holder’s identity has changed, that the worker isn’t qualified for H-1B based on skills or education, or the company isn’t qualified for the H-1B program.

H-1Bs, even though they aren’t citizens or permanent residents, are given Social Security numbers so they can pay taxes on their U.S. income. A study by the Social Security Administration, which is careful to point out that its job doesn’t include immigration monitoring or enforcement, found a number of H-1B anomalies, the most striking of which to me was that seven percent of H-1B employers reported no payments at all to H-1B visa holders. This is no big deal to the SSA because these people qualify for no benefits, but it makes one wonder whether they are under-reporting just Social Security or also to the IRS and why they might do so? Those H-1B employers who do report Social Security income do so at a level that is dramatically lower than one might expect for job classifications that are legally required to pay the “prevailing wage.”

Maybe at this point I should point out that the H-1B visa program is administered by the Department of Homeland Security. Feel better?

One defense of H-1B might be that it raises overall skill levels, but studies show H-1B employees to be consistently less capable than their US citizen counterparts. This data point is especially interesting because it is drawn from the LCA data where applying companies claimed that 56 percent of H-1B applicants were in the lowest skill category and could therefore be paid the least. So at the same time companies are claiming they need the H-1B program to bring in skilled workers, the workers they are bringing in aren’t very skilled at all. Or if they are skilled, then the sponsoring companies are fudging their paperwork to justify paying lower than market wages.

Either truth is damning and the latter is downright illegal.

Here’s where I’ll give a shout-out to the Libertarian contingent reading this column because they’ll tend to say “So what? It’s every man or woman for himself. Employers should be able to do whatever they damned well please while workers can always go elsewhere.”

But it’s against the law.

Lawyer's Perspective

At this point a longtime reader of this column speaks up:

I have been a practicing immigration attorney for over 13 years. I have done many H-1B visas and like any other government program it was loaded and is still loaded with abuses… In my opinion, employers who need H-1B Visa workers should have to go through a screening process before they are allowed to submit the application and a bond should be posted if they violate the law.

For a large multinational corporation to play this game is not new. The reason that they carry on with these activities are for one reason only — control. Control of the employee and uneven bargaining at the end of the day. I have dealt with this with different multinational corporations… and they have, can and will act in the same manner. As always, it takes either an investigation by the USDOJ or massive fines (or both) to redirect bad behavior to federal compliance.

Even if I wasn’t at ground zero in this stuff, it would still bother me,” wrote another longtime reader who has spent his entire career in IT. “Our country spent decades learning to treat workers fairly and with respect. The driving force behind unions in the first place was to address serious problems in the workplace. With all this offshoring and H-1B crap, we’ve dumped 100 years of improving society down the drain. Maybe USA workers do cost too much. The problem is we are not fixing the actual problem. As more and more jobs go off shore, the damage to our economy grows. If we would fix the problemsthe playing field would be more level and USA workers could compete for jobs. These abuses by corporations are not only hurting USA workers, they are hurting our nation.